WEBVTT NOTE 2. The Christian Middle Ages 1 00:00:00.000 --> 00:00:05.000 Chapter 2. The Christian Middle Ages 2 00:00:05.000 --> 00:00:14.000 1. The Roman Law, Property Rights and Laissez-faire 3 00:00:14.000 --> 00:00:19.200 One of the most powerful influences in the legal and political thought and institutions 4 00:00:19.200 --> 00:00:25.880 of the Christian West during the Middle Ages was the Roman Law, derived from the Republic 5 00:00:25.880 --> 00:00:29.480 Public and Empire of Ancient Rome. 6 00:00:29.480 --> 00:00:35.360 Roman law classically developed in the first to the third centuries A.D. 7 00:00:35.360 --> 00:00:41.200 Private law developed the theory of the absolute right of private property and of freedom of 8 00:00:41.200 --> 00:00:43.960 trade and contract. 9 00:00:43.960 --> 00:00:49.800 While Roman public law theoretically allowed state interference in the life of the citizen, 10 00:00:49.800 --> 00:00:55.180 there was little such interference in the late republic and early empire. 11 00:00:55.180 --> 00:01:00.300 That property rights and laissez-faire were therefore the fundamental heritage of the Roman 12 00:01:00.300 --> 00:01:07.500 law to later centuries, and much of it was adopted by countries of the Christian West. 13 00:01:07.500 --> 00:01:14.020 Though the Roman Empire collapsed in the 4th and 5th centuries, its legal heritage continued 14 00:01:14.020 --> 00:01:19.340 as embodied in two great collections of the Roman law. 15 00:01:19.340 --> 00:01:39.340 For example, in the West, the Theodosian Code, promulgated by the Emperor Theodosius in 438 AD, and in the East, the great four-volume Corpus Juris Civilis, promulgated by the Byzantine Christian Emperor Justinian in the 530s. 16 00:01:39.340 --> 00:01:45.880 Both collections emphasized strongly that the just price was simply any price arrived 17 00:01:45.880 --> 00:01:52.840 at by free and voluntary bargaining between buyer and seller. Each man has the right to 18 00:01:52.840 --> 00:01:59.760 do what he wants with his property, and therefore has the right to make contracts to give away, 19 00:01:59.760 --> 00:02:08.200 buy or sell such property. Hence, whatever price is freely arrived at is just. Thus, 20 00:02:08.200 --> 00:02:14.220 In the corpus, several leading Roman jurists of the third century quoted the early second 21 00:02:14.220 --> 00:02:21.840 century jurist Pomponius in a classic expression of the morality of laissez-faire. 22 00:02:21.840 --> 00:02:28.100 In buying and selling, natural law permits the one party to buy for less and the other 23 00:02:28.100 --> 00:02:31.160 to sell for more than the thing is worth. 24 00:02:31.160 --> 00:02:36.200 Thus, each party is allowed to outwit the other. 25 00:02:36.200 --> 00:02:41.760 And it is naturally permitted to parties to circumvent each other in the price of buying 26 00:02:41.760 --> 00:02:44.000 and selling. 27 00:02:44.000 --> 00:02:50.560 The only problem here is the odd phrase, the thing is worth, which assumes that there is 28 00:02:50.560 --> 00:02:57.580 some value other than free bargaining that expresses some true worth, a phrase that would 29 00:02:57.580 --> 00:03:02.520 prove to be an unfortunate harbinger of the future. 30 00:03:02.520 --> 00:03:07.120 More specifically, the Theodosian Code was crystal clear. 31 00:03:07.120 --> 00:03:14.160 Any price set by free and voluntary bargaining is just and legitimate, the only exception 32 00:03:14.160 --> 00:03:17.800 being a contract made by children. 33 00:03:17.800 --> 00:03:24.540 Force or fraud, as infringements on property rights, were, of course, considered illegal. 34 00:03:24.540 --> 00:03:30.800 The Code held explicitly that ignorance of the value of a good by either buyer or seller 35 00:03:30.800 --> 00:03:36.960 was insufficient ground for authorities to step in and rescind the voluntarily agreed 36 00:03:36.960 --> 00:03:39.160 contract. 37 00:03:39.160 --> 00:03:43.280 The Theodosian Code was carried forward in Western Europe. 38 00:03:43.280 --> 00:03:49.600 For example, the Visigothic Law set forth in the 6th and 7th centuries, and the Bavarian 39 00:03:49.600 --> 00:03:52.800 Law of the early 8th century. 40 00:03:52.800 --> 00:03:58.620 Bavarian Law added the explicit provision that a buyer may not rescind a sale because 41 00:03:58.620 --> 00:04:03.420 as he later decides that the agreed price was too high. 42 00:04:03.420 --> 00:04:09.320 This laissez-faire aspect of the Theodosian Code later became incorporated into Christian 43 00:04:09.320 --> 00:04:16.780 canon law by being included in the collection of capitularies, decrees, by St. Benedictus 44 00:04:16.780 --> 00:04:21.820 Diaconis in the 9th century A.D. 45 00:04:21.820 --> 00:04:28.220 While the Justinian corpus promulgated in the east was equally devoted to laissez-faire, 46 00:04:28.220 --> 00:04:35.420 It included a minor element that was later to grow and justify a tax upon free bargaining. 47 00:04:35.420 --> 00:04:40.940 As part of the Justinian discussion of how courts can appraise property for payment of 48 00:04:40.940 --> 00:04:47.460 damages, the Code mentioned that if a seller has sold his property for less than half the 49 00:04:47.460 --> 00:04:56.460 just price, then he suffers great loss, la esio enormous, and the seller is then entitled 50 00:04:56.460 --> 00:05:01.740 would either to get back the difference between the original price and the just price from 51 00:05:01.740 --> 00:05:07.840 the buyer, or else get his property back at that original price. 52 00:05:07.840 --> 00:05:14.980 This clause was apparently meant only to apply to real estate and to compensations for damages, 53 00:05:14.980 --> 00:05:21.140 where authorities must somehow assess the true price, and it had no influence on the 54 00:05:21.140 --> 00:05:29.140 The Laws of the Next Centuries, but it was to yield unfortunate effects in the future. 55 00:05:29.140 --> 00:05:35.940 2. Early Christian Attitudes Toward Merchants 56 00:05:35.940 --> 00:05:42.860 Roman law was not the only influence on economic ideas in the Middle Ages. Ambivalent attitudes 57 00:05:42.860 --> 00:05:48.800 in the early Christian tradition also proved highly important. 58 00:05:48.800 --> 00:05:54.440 Economic matters were, of course, scarcely central to either the Old or New Testament, 59 00:05:54.440 --> 00:06:02.400 and scattered economic pronouncements are contradictory or subject to ambivalent interpretation. 60 00:06:02.400 --> 00:06:08.280 Fulminations against excessive love of money do not necessarily imply hostility to commerce 61 00:06:08.280 --> 00:06:10.280 or wealth. 62 00:06:10.280 --> 00:06:16.680 One remarkable aspect of the Old Testament, however, is its repeated, almost pre-Calvinist 63 00:06:16.680 --> 00:06:20.540 and the first extolling of work for its own sake. 64 00:06:20.540 --> 00:06:26.540 In contrast to the contemptuous attitude toward labor of the Greek philosophers, the Old Testament 65 00:06:26.540 --> 00:06:34.120 is filled with exhortations in favor of work, from the be fruitful and multiply of Genesis 66 00:06:34.120 --> 00:06:40.840 to enjoy life in your toil at which you toil under the sun of Ecclesiastes. 67 00:06:40.840 --> 00:06:48.840 Oddly, these calls to labor are often accompanied by admonitions against the accumulation of wealth. 68 00:06:48.840 --> 00:07:00.840 Later, in the second century B.C., the Hebrew scribe who wrote the apocryphal book Ecclesiasticus goes so far as to extol labor as a sacred calling. 69 00:07:00.840 --> 00:07:09.840 Manual workers, he writes, keep stable the fabric of the world, and their prayer is in the practice of their trade. 70 00:07:09.840 --> 00:07:16.840 Yet the pursuit of money is condemned, and merchants are habitually treated with deep suspicion. 71 00:07:16.840 --> 00:07:24.840 A merchant can hardly keep from wrongdoing, and a tradesman will not be declared innocent of sin. 72 00:07:24.840 --> 00:07:34.840 And yet, in the same book of Ecclesiasticus, the reader is instructed not to be ashamed of profit or success in business. 73 00:07:34.840 --> 00:07:49.840 The attitude of the early Christians, including Jesus and the apostles, toward work and trade, was colored by their intense expectation of the imminent end of the world and of the coming of the kingdom of God. 74 00:07:49.840 --> 00:08:00.840 Obviously, if one expects the impending end of the world, one is inclined to have little patience for such activities as investing or accumulating wealth. 75 00:08:00.840 --> 00:08:08.840 Rather, the tendency is to act as the lilies of the field, to follow Jesus and forget about mundane matters. 76 00:08:08.840 --> 00:08:17.840 It was in this context that we must understand St. Paul's famous, the love of money is the root of all evil. 77 00:08:17.840 --> 00:08:29.840 By approximately 100 A.D., however, the books of the New Testament written by St. John make it clear that the Christian Church had abandoned the idea of the eminent end of the world. 78 00:08:29.840 --> 00:08:32.120 End of the World. 79 00:08:32.120 --> 00:08:38.160 But the Hellenistic and the Gospel heritage fused to lead the early Church Fathers into 80 00:08:38.160 --> 00:08:44.920 a retreatist view of the world and its economic activities, combined with fulminations against 81 00:08:44.920 --> 00:08:49.920 wealth and merchants who tend to amass such wealth. 82 00:08:49.920 --> 00:08:55.440 The Church Fathers railed against mercantile activities as necessarily stamped with the 83 00:08:55.440 --> 00:09:02.440 The Sin of Greed and, as almost always, accompanied by deceit and fraud. 84 00:09:02.440 --> 00:09:10.400 Leading the parade was the mystical and apocalyptic Tertullian, 160 to 240, a prominent Carthaginian 85 00:09:10.400 --> 00:09:18.520 lawyer who converted late in life to Christianity and eventually formed his own heretical sect. 86 00:09:18.520 --> 00:09:25.080 To Tertullian, attack on merchants and money-making was part and parcel of a general Philippic 87 00:09:25.080 --> 00:09:31.020 against the Secular World, which he expected at any moment to founder on the shoals of 88 00:09:31.020 --> 00:09:37.920 excess population so that the earth would soon suffer from epidemics, famines, wars, 89 00:09:37.920 --> 00:09:43.860 and the earth's opening to swallow whole cities as a grisly solution to the overpopulation 90 00:09:43.860 --> 00:09:46.240 problem. 91 00:09:46.240 --> 00:09:54.200 Two centuries later, the fiery St. Jerome, circa 340 to 420, educated in Rome but also 92 00:09:54.200 --> 00:10:00.100 so influenced by the Eastern Fathers, took up the theme, proclaiming the fallacy that 93 00:10:00.100 --> 00:10:06.760 in trade, one man's gain must be achieved by means of the other man's loss. 94 00:10:06.760 --> 00:10:13.840 All riches come from iniquity, and unless one has lost, another cannot gain. 95 00:10:13.840 --> 00:10:18.040 Hence that common opinion seems to me to be very true. 96 00:10:18.040 --> 00:10:23.900 The rich man is unjust, or the heir of an unjust one. 97 00:10:23.900 --> 00:10:30.660 And yet there was another contradictory strain even in Jerome who also declared that a wise 98 00:10:30.660 --> 00:10:37.380 man with riches has greater glory than one who is wise only, for he can accomplish more 99 00:10:37.380 --> 00:10:39.540 good things. 100 00:10:39.540 --> 00:10:45.500 Wealth is not an obstacle to the rich man who uses it well. 101 00:10:45.500 --> 00:10:50.260 Probably the most intelligent attitude toward wealth and money-making among the early Church 102 00:10:50.260 --> 00:10:56.980 of Church Fathers was that of the Athenian-born Eastern father Clement of Alexandria, circa 103 00:10:56.980 --> 00:11:00.220 150 to 215. 104 00:11:00.220 --> 00:11:05.500 While Clement counseled that property be used for the good of the community, he endorsed 105 00:11:05.500 --> 00:11:09.540 private property and the accumulation of wealth. 106 00:11:09.540 --> 00:11:16.240 He attacked as foolish the ascetic ideal of divesting oneself of one's possessions. 107 00:11:16.240 --> 00:11:21.040 As Clement wisely put it, employing a natural law theme, 108 00:11:21.040 --> 00:11:26.160 We must not cast away riches which can benefit our neighbor. 109 00:11:26.160 --> 00:11:28.920 Possessions were made to be possessed. 110 00:11:28.920 --> 00:11:34.480 Goods are called goods because they do good, and they have been provided by God for the 111 00:11:34.480 --> 00:11:36.320 good of men. 112 00:11:36.320 --> 00:11:41.760 They are at hand and serve as the material, the instruments for a good use in the hand 113 00:11:41.760 --> 00:11:45.780 of him who knows how to use them. 114 00:11:45.780 --> 00:11:50.540 and also took a hard-nosed attitude toward the ruthless poor. 115 00:11:50.540 --> 00:11:57.860 If living without possessions was so desirable, he pointed out, then that whole swarm of proletarians, 116 00:11:57.860 --> 00:12:04.060 derelicts and beggars who live from hand to mouth, all those wretched cast out upon the 117 00:12:04.060 --> 00:12:10.340 streets though they live in ignorance of God and of His justice, would be the most blessed 118 00:12:10.340 --> 00:12:18.620 and the most religious, and the only candidates for eternal life simply because they are penniless. 119 00:12:18.620 --> 00:12:26.460 The early Church Fathers culminated in the great St. Augustine, 354-430, who, living 120 00:12:26.460 --> 00:12:33.020 at the time of the sack of Rome in 410 and of the collapse of the Roman Empire, had to 121 00:12:33.020 --> 00:12:39.380 look ahead to a post-ancient world which he was greatly to influence. 122 00:12:39.380 --> 00:12:46.600 Born in Numidia in Africa, Aurelius Augustinus was educated in Carthage and became a professor 123 00:12:46.600 --> 00:12:49.820 of rhetoric in Milan. 124 00:12:49.820 --> 00:12:55.540 Baptized a Christian at the age of 32, St. Augustine became Bishop of Hippo in his native 125 00:12:55.540 --> 00:12:57.660 North Africa. 126 00:12:57.660 --> 00:13:04.360 The Roman Empire under Constantine had embraced Christianity a century earlier, and Augustine 127 00:13:04.360 --> 00:13:10.000 Augustine wrote his great work The City of God as a rebuttal to the charge that the embrace 128 00:13:10.000 --> 00:13:15.600 of Christianity had resulted in the fall of Rome. 129 00:13:15.600 --> 00:13:20.520 Augustine's economic views were scattered throughout The City of God and his other highly 130 00:13:20.520 --> 00:13:27.640 influential writings, but he definitely and presumably independently of Aristotle arrived 131 00:13:27.640 --> 00:13:34.080 at the view that people's payments for goods, the valuation they placed on them was determined 132 00:13:34.080 --> 00:13:41.000 and by their own needs, rather than by any more objective criterion, or by their rank 133 00:13:41.000 --> 00:13:43.640 in the order of nature. 134 00:13:43.640 --> 00:13:49.720 This was at least the basis of the later Austrian theory of subjective value. 135 00:13:49.720 --> 00:13:55.800 He also pointed out that it was the common desire of all men to buy cheap and to sell 136 00:13:55.800 --> 00:13:57.080 dear. 137 00:13:57.080 --> 00:14:02.820 Furthermore, Augustine was the first church father to have a positive attitude towards 138 00:14:02.820 --> 00:14:10.720 Rebutting the Common Patristic Charges Against the Merchants, Augustine pointed out that 139 00:14:10.720 --> 00:14:16.980 they perform a beneficial service by transporting goods over great distances and selling them 140 00:14:16.980 --> 00:14:19.260 to the consumer. 141 00:14:19.260 --> 00:14:25.100 Since according to Christian principle the laborer is worthy of his hire, then the merchant 142 00:14:25.100 --> 00:14:30.800 too deserved compensation for his activities and labor. 143 00:14:30.800 --> 00:14:36.600 To the common charge of endemic deceit and fraud in the mercantile trades, Augustine 144 00:14:36.600 --> 00:14:43.280 cogently replied that any such lies and perjuries were the fault not of the trade, but of the 145 00:14:43.280 --> 00:14:45.720 trader himself. 146 00:14:45.720 --> 00:14:51.820 Such sins originated in the iniquity of the person, not in his occupation. 147 00:14:51.820 --> 00:14:58.800 After all, Augustine pointed out, shoemakers and farmers are also capable of lies and perjuries, 148 00:14:58.800 --> 00:15:06.720 And yet the Church Fathers had not condemned their occupations as being per se evil. 149 00:15:06.720 --> 00:15:12.280 Clearing the merchants of the stain of inherent evil proved enormously influential in the 150 00:15:12.280 --> 00:15:18.080 following centuries and was quoted time and again in the flowering of Christian thought 151 00:15:18.080 --> 00:15:21.480 in the 12th and 13th centuries. 152 00:15:21.480 --> 00:15:28.220 A less tangible but still important contribution to social thought was St. Augustine's recasting 153 00:15:28.220 --> 00:15:32.980 Dictating of the Ancient World's View of the Human Personality 154 00:15:32.980 --> 00:15:38.340 To the Greek philosophers, the individual personality was to be molded to conform to 155 00:15:38.340 --> 00:15:46.840 the needs and desires of the polis. Dictation by the polis necessarily meant a static society, 156 00:15:46.840 --> 00:15:52.640 with discouragement directed towards any innovating entrepreneurs trying to break out of the 157 00:15:52.640 --> 00:15:55.160 and Contemporary Mold. 158 00:15:55.160 --> 00:16:01.520 But St. Augustine's stress was on the individual's personality unfolding itself and therefore 159 00:16:01.520 --> 00:16:04.400 progressing over time. 160 00:16:04.400 --> 00:16:10.720 Hence Augustine's profound emphasis on the individual at least set the stage indirectly 161 00:16:10.720 --> 00:16:17.200 for an attitude favorable to innovation, economic growth and development. 162 00:16:17.200 --> 00:16:22.420 That aspect of Augustine's thought, however, was not really stressed by the 13th century 163 00:16:22.420 --> 00:16:28.400 Christian theologians and philosophers who built on Augustine's thought. 164 00:16:28.400 --> 00:16:34.720 It is ironic that the man who set the stage for optimism and a theory of human progress 165 00:16:34.720 --> 00:16:43.020 should on his deathbed find the barbarian hordes besieging his beloved city of Hippo. 166 00:16:43.020 --> 00:16:48.580 If St. Augustine looked benignly on the role of the merchant, he was also favorable, though 167 00:16:48.580 --> 00:16:54.000 not as warmly, toward the social role of rulers of state. 168 00:16:54.000 --> 00:17:00.180 On the one hand, Augustine took up and expanded Cicero's parable, demonstrating that Alexander 169 00:17:00.180 --> 00:17:05.780 the Great was simply a pirate writ large, and that the state is nothing but a large 170 00:17:05.780 --> 00:17:09.200 scale and settled robber band. 171 00:17:09.200 --> 00:17:17.080 In his famous City of God, Augustine asks, And so, if justice is left out, what are kingdoms 172 00:17:17.080 --> 00:17:19.680 except great robber bands? 173 00:17:19.680 --> 00:17:23.480 For what are robber bands except little kingdoms? 174 00:17:23.480 --> 00:17:29.800 The band also is a group of men governed by the orders of a leader, bound by a social 175 00:17:29.800 --> 00:17:35.720 compact, and its booty is divided according to a law agreed upon. 176 00:17:35.720 --> 00:17:42.380 If by repeatedly adding desperate men this plague grows to the point where it holds territory 177 00:17:42.380 --> 00:17:49.700 and establishes a fixed seat, seizes cities and subdues people, then it more conspicuously 178 00:17:49.700 --> 00:17:57.180 assumes the name of kingdom, and this name is now openly granted to it, not for any subtraction 179 00:17:57.180 --> 00:18:01.520 of cupidity but by addition of impunity. 180 00:18:01.520 --> 00:18:07.600 For it was an elegant and true reply that was made to Alexander the Great by a certain 181 00:18:07.600 --> 00:18:10.480 pirate whom he had captured. 182 00:18:10.480 --> 00:18:16.000 When the king asked him what he was thinking of, that he should molest the sea, he said 183 00:18:16.000 --> 00:18:21.880 with defiant independence, the same as you when you molest the world. 184 00:18:21.880 --> 00:18:25.720 Since I do this with a little ship, I am called a pirate. 185 00:18:25.720 --> 00:18:30.680 You do it with a great fleet and are called emperor. 186 00:18:30.680 --> 00:18:36.440 And Augustine ends by approving the role of the State, even though it is a robber band 187 00:18:36.440 --> 00:18:38.800 on a large scale. 188 00:18:38.800 --> 00:18:45.440 For while he stressed the individual rather than the polis, in pre-Calvinist fashion Augustine 189 00:18:45.440 --> 00:18:50.060 emphasized the wickedness and depravity of man. 190 00:18:50.060 --> 00:18:57.160 In this fallen, wicked and sinful world, State rule, though unpleasant and coercive, becomes 191 00:18:57.160 --> 00:18:58.160 necessary. 192 00:18:58.160 --> 00:19:14.160 Hence, Augustine supported the forcible crushing by the Christian Church in North Africa of the Donatist heresy, which indeed believed, in contrast to Augustine, that all kings were necessarily evil. 193 00:19:14.160 --> 00:19:34.160 The likening of the head of state to a large-scale brigand, however, was resurrected in its original anti-state context by the great pope, Gregory VII, in the course of his struggle with the kings of Europe over his Gregorian reforms in the late 11th century. 194 00:19:34.160 --> 00:19:44.160 This strain of bitter anti-statism, then, emerges from time to time in the early Christian era and in the Middle Ages. 195 00:19:46.160 --> 00:19:51.160 3. The Carolingians and Canon Law 196 00:19:51.160 --> 00:19:58.160 Canon law was the law governing the Church, and during the early Christian era and the Middle Ages, 197 00:19:58.160 --> 00:20:15.160 Early canon law consisted of papal decretals, decrees of church councils, and the writings of the church fathers. 198 00:20:15.160 --> 00:20:21.160 We have seen that later canon law also incorporated much of the Roman law. 199 00:20:21.160 --> 00:20:26.160 But canon law also included something else basically pernicious. 200 00:20:26.160 --> 00:20:35.160 The Decrees and Regulations, Capitularies, of the Carolingian Empire in the latter 8th and 9th centuries. 201 00:20:35.160 --> 00:20:44.160 From the 5th to the 10th centuries, the economic and political chaos of the Dark Ages prevailed throughout Europe, 202 00:20:44.160 --> 00:20:52.160 and there was, consequently, little or no room for the development of political, legal or economic thought. 203 00:20:52.160 --> 00:20:59.160 The only exception was the activities of the Carolingian Empire, which burgeoned in Western Europe. 204 00:20:59.160 --> 00:21:06.160 The most important Carolingian emperor was Charlemagne, 742 to 814, 205 00:21:06.160 --> 00:21:12.160 and his rule developed on to his successors during the remainder of the 9th century. 206 00:21:12.160 --> 00:21:20.160 In capitulary after capitulary, Charlemagne and his successors laid down detailed regulations 207 00:21:20.160 --> 00:21:26.160 for every aspect of economic, political and religious life throughout the Empire. 208 00:21:26.160 --> 00:21:32.160 Many of these regulations became incorporated into the canon law of later centuries, 209 00:21:32.160 --> 00:21:39.160 thereby remaining influential well after the crumbling of the Carolingian Empire itself. 210 00:21:39.160 --> 00:21:45.160 Charlemagne built his despotic network of regulations on a shaky foundation. 211 00:21:45.160 --> 00:21:53.280 Thus, the important Church Council of Nicaea, 325, had forbidden any clergymen from engaging 212 00:21:53.280 --> 00:22:00.520 in any economic activities leading to shameful gain, turpe lucrum. 213 00:22:00.520 --> 00:22:07.840 In his council at Nijmegen, 806, Charlemagne revived, greatly broadened, and imposed the 214 00:22:07.840 --> 00:22:11.100 old doctrine of turpe lucrum. 215 00:22:11.100 --> 00:22:16.420 But now the prohibition was extended from the clergy to everyone, and the definition 216 00:22:16.420 --> 00:22:23.860 broadened from fraud to all greed and avarice, and included any disobedience of Charlemagne's 217 00:22:23.860 --> 00:22:27.100 extensive price regulations. 218 00:22:27.100 --> 00:22:33.360 Any market deviations from these fixed prices were accused of being profiteering by either 219 00:22:33.360 --> 00:22:38.300 buyers or sellers, and hence torpe lucrum. 220 00:22:38.300 --> 00:22:44.500 As a corollary, all speculative buying and selling in foodstuffs was prohibited. 221 00:22:44.500 --> 00:22:51.500 Moreover, in foreshadowing the English common law prohibition of forestalling, any sale 222 00:22:51.500 --> 00:22:58.740 of goods outside and at higher prices than the regular markets was prohibited. 223 00:22:58.740 --> 00:23:04.980 Since the English common law was motivated not by a misguided attempt to aid the poor, 224 00:23:04.980 --> 00:23:11.340 But in order to confer monopoly privileges on local owners of market sites, it is highly 225 00:23:11.340 --> 00:23:17.860 probable that Charlemagne, too, was trying to cartelize markets and confer privileges 226 00:23:17.860 --> 00:23:20.780 on market owners. 227 00:23:20.780 --> 00:23:26.620 Every arbitrary price decree of the Carolingian officialdom was, of course, revered by the 228 00:23:26.620 --> 00:23:31.020 Carolingians as the just price. 229 00:23:31.020 --> 00:23:36.920 Normally this coerced price was often near what had been a customary or current price 230 00:23:36.920 --> 00:23:38.920 in the neighborhood. 231 00:23:38.920 --> 00:23:44.100 Otherwise it would be difficult to conceive how the Carolingian officials would discover 232 00:23:44.100 --> 00:23:47.520 what price was supposed to be just. 233 00:23:47.520 --> 00:23:54.080 But this meant a futile and uneconomic attempt to freeze all prices on the basis of some 234 00:23:54.080 --> 00:23:57.740 past market status quo. 235 00:23:57.740 --> 00:24:04.240 The problem, then, is that later canon law incorporated the idea of the just price as 236 00:24:04.240 --> 00:24:07.820 being the state decreed price. 237 00:24:07.820 --> 00:24:13.260 The banning of any price higher than the current market price was reimposed by the 238 00:24:13.260 --> 00:24:21.020 late Carolingian emperor, Carloman, in 1884, and incorporated into the canon law collection 239 00:24:21.020 --> 00:24:29.420 of Regino of Prum in 900, and over a century later into that of Burchard of Worms. 240 00:24:29.420 --> 00:24:35.700 Remarkably the two contradictory legal strains, the laissez-faire theme of the Theodosian 241 00:24:35.700 --> 00:24:42.620 Code and the statist Carolingian motif, both found their way into the great collection 242 00:24:42.620 --> 00:24:49.100 at the basis of the medieval discipline of the canon law, that of Bishop Evo of Chartres 243 00:24:49.100 --> 00:24:55.220 at the Turn of the Twelfth Century. There, in the same collection, we find the view that 244 00:24:55.220 --> 00:25:03.260 the just price is any price voluntarily arrived at by buyer and seller, and, also, the contradictory 245 00:25:03.260 --> 00:25:09.660 view that the just price is one decreed by the State, especially if it be the common 246 00:25:09.660 --> 00:25:13.140 price in general markets. 247 00:25:13.140 --> 00:25:21.340 4. Canonists and Romanists at the University of Bologna 248 00:25:21.340 --> 00:25:27.100 The High Middle Ages were established by the commercial revolution of the 11th to 13th 249 00:25:27.100 --> 00:25:33.860 centuries in which trade, production and finance flourished, living standards rose markedly 250 00:25:33.860 --> 00:25:39.940 and the institutions of commercial capitalism developed in Western Europe. With the advent 251 00:25:39.940 --> 00:25:47.260 of Economic Growth and Prosperity, Canon and Roman Law, Learning and Social Thought, also 252 00:25:47.260 --> 00:25:50.500 began to flourish once again. 253 00:25:50.500 --> 00:25:55.720 The fountainhead and great center of both Canon and Roman Law studies during the High 254 00:25:55.720 --> 00:26:02.060 Middle Ages was the University of Bologna in Italy, flourishing from the early 12th 255 00:26:02.060 --> 00:26:05.820 century to the latter part of the 13th. 256 00:26:05.820 --> 00:26:11.800 During those two centuries, both canon and roman law, including the Justinian Code, were 257 00:26:11.800 --> 00:26:19.180 revived at Bologna, influenced each other, and penetrated to the rest of Western Europe. 258 00:26:19.180 --> 00:26:24.980 The great and definitive collection of canon law, the Decretum, was published around the 259 00:26:24.980 --> 00:26:32.860 year 1140 by the Italian monk, Johannes Gracian, who founded canon law studies at the University 260 00:26:32.860 --> 00:26:34.500 of Bologna. 261 00:26:34.500 --> 00:26:40.460 The Decretum was the definitive canon law work from that point on, and for the remainder 262 00:26:40.460 --> 00:26:48.020 of the 12th century, Bolognese scholars, known as the Decretists, elaborated, discussed, 263 00:26:48.020 --> 00:26:55.780 and wrote glosses on Gratian's work. Gratian himself and his early Glossators took a traditional 264 00:26:55.780 --> 00:27:03.580 zealous anti-merchant position. Speculation, buying cheap to sell deer, purely mercantile 265 00:27:03.580 --> 00:27:15.900 The first Decretus to begin to take an intelligent position on the activities of the merchant 266 00:27:15.900 --> 00:27:22.640 was Rufanus, a professor at Bologna who later became Bishop of Assisi and then Archbishop 267 00:27:22.640 --> 00:27:24.860 of Sorrento. 268 00:27:24.860 --> 00:27:33.540 In his Summa, 1157-1159, to the Decretum, Rufanus pointed out that artisans and craftsmen 269 00:27:33.540 --> 00:27:39.020 Craftsmen could buy materials cheaply, work on them and transform them, and then sell 270 00:27:39.020 --> 00:27:45.940 the product at a higher price. This form of buying cheap and selling deer was justified 271 00:27:45.940 --> 00:27:52.060 by the craftsman's expenses and labor, and is permissible even to the clergy as well 272 00:27:52.060 --> 00:27:59.340 as to the laity. However, another activity, practiced by the pure merchant or speculator 273 00:27:59.340 --> 00:28:07.180 who buys cheap and sells dear without transforming the product is, according to Rufinus, absolutely 274 00:28:07.180 --> 00:28:10.020 forbidden to the clergy. 275 00:28:10.020 --> 00:28:15.860 The lay merchant, however, could honorably engage in these transactions, provided that 276 00:28:15.860 --> 00:28:22.220 he had either made heavy expenditures or was fatigued by hard labor. 277 00:28:22.220 --> 00:28:28.020 But a pure entrepreneurial cheap purchase to be followed by a sale when market prices 278 00:28:28.020 --> 00:28:39.460 This partial rehabilitation of the merchant by the decretists was included in the important 279 00:28:39.460 --> 00:28:48.220 Summa of 1188 of Hugguccio, professor at Polonia, later chosen bishop of Ferrara. 280 00:28:48.220 --> 00:28:54.060 Hugguccio repeated the views of Rufinus, but shifted the justification of the merchant 281 00:28:54.060 --> 00:29:00.820 from labor or expenses to actions that provide for the needs of the merchant's family. 282 00:29:00.820 --> 00:29:07.940 Hugguccio's stress, then, was not on objective costs, but on the subjective intentions of 283 00:29:07.940 --> 00:29:12.240 the merchant, supposing that they could be discovered. 284 00:29:12.240 --> 00:29:17.500 Was it mere greed, or was it a desire to fulfill his family's needs? 285 00:29:17.500 --> 00:29:24.040 Clearly, Hugguccio allowed considerable room for mercantile activities. 286 00:29:24.040 --> 00:29:31.680 Moreover, Hugguccio began a radical reconstruction of patristic teachings about private property. 287 00:29:31.680 --> 00:29:37.880 From the time of Hugguccio, private property was to be considered a sacrosanct right derived 288 00:29:37.880 --> 00:29:40.240 from the natural law. 289 00:29:40.240 --> 00:29:45.480 The property of individuals and communities was, at least in principle, supposed to be 290 00:29:45.480 --> 00:29:50.360 free from arbitrary invasion on the part of the state. 291 00:29:50.360 --> 00:29:56.440 As moderator and arbiter of his own goods, an individual owner could use and dispose 292 00:29:56.440 --> 00:30:02.760 of them as he saw fit, provided that he did not violate general legal rules. 293 00:30:02.760 --> 00:30:08.660 A ruler could only expropriate the property of an innocent subject if public necessity 294 00:30:08.660 --> 00:30:10.780 required it. 295 00:30:10.780 --> 00:30:16.560 This of course was a hole in the system of rights, since public necessity could be and 296 00:30:16.560 --> 00:30:19.660 was an elastic concept. 297 00:30:19.660 --> 00:30:26.980 But this concept of private property was an enormous advance over patristic teachings. 298 00:30:26.980 --> 00:30:33.340 After the late 12th century, the decretist movement in canon law gave way to the decretalists, 299 00:30:33.340 --> 00:30:39.660 who based themselves on a stream of papal edicts, or decretals, from the late 12th to 300 00:30:39.660 --> 00:30:42.260 the 13th century. 301 00:30:42.260 --> 00:30:47.860 Since the pope is supreme in the Catholic Church, the decretals pronounced by him and 302 00:30:47.860 --> 00:30:55.220 and his Vatican Curia automatically became incorporated into the body of canon law. 303 00:30:55.220 --> 00:31:01.340 In this way, canon law came to differ from that of Gratian and the Decretists, who built 304 00:31:01.340 --> 00:31:04.900 the law chiefly on ancient sources. 305 00:31:04.900 --> 00:31:08.180 But the new decretals were scarcely arbitrary. 306 00:31:08.180 --> 00:31:12.580 They built on and elaborated previous canon law. 307 00:31:12.580 --> 00:31:17.620 The continuity of the building process was greatly aided by the fact that several of 308 00:31:17.620 --> 00:31:25.540 of these popes were former Bolognese. Thus Pope Alexander III, Roland Bandinelli, who 309 00:31:25.540 --> 00:31:34.780 initiated the new decretal process and who enjoyed a long papal reign from 1159 to 1181, 310 00:31:34.780 --> 00:31:41.940 had studied both law and theology at Bologna, was probably a professor there and had direct 311 00:31:41.940 --> 00:31:47.600 Contact with the Great Grecian A distinguished legal scholar, who himself 312 00:31:47.600 --> 00:31:55.080 had written an early Summa to Grecian's Decretum, Alexander became Cardinal and Chancellor before 313 00:31:55.080 --> 00:32:02.780 being elected to the papacy. Another significant papal decretalist, Pope Innocent II, Lothair 314 00:32:02.780 --> 00:32:10.500 Pierre de Seigne, who reigned from 1198 to 1216, had studied canon law under Hugguccio 315 00:32:10.500 --> 00:32:12.300 at Bologna. 316 00:32:12.300 --> 00:32:21.660 Finally, Pope Gregory IX, Ugollino de Seigne, a pontiff from 1227 to 1241, commissioned 317 00:32:21.660 --> 00:32:29.800 and published the momentous Decretals in 1234, incorporating Gratian's Decretum of a century 318 00:32:29.800 --> 00:32:37.760 before, in addition to the various papal decretals. Gregory 9th's decretals became the standard 319 00:32:37.760 --> 00:32:42.120 work of canon law from that point on. 320 00:32:42.120 --> 00:32:47.560 The decretalists had a far more favorable attitude toward merchants and the free market 321 00:32:47.560 --> 00:32:54.320 than had the early decretists. In the first place, instead of the negative patristic attitude 322 00:32:54.320 --> 00:33:01.300 toward Merchants and Trade, the Decretalists, beginning with Pope Alexander III and continuing 323 00:33:01.300 --> 00:33:07.840 through Gregory IX, incorporated the free market attitude of the Roman law. 324 00:33:07.840 --> 00:33:14.240 Unfortunately it was not the pure laissez-faire attitude of the Theodosian or even Justinian 325 00:33:14.240 --> 00:33:15.800 law. 326 00:33:15.800 --> 00:33:20.940 For when the Justinian Code came to Bologna and Western Europe at the beginning of the 327 00:33:20.940 --> 00:33:27.140 of the 12th Century, the French author of the Brachologus took up the Laecio Enormous 328 00:33:27.140 --> 00:33:33.340 Principle of the Justinian Code and greatly changed its meaning. 329 00:33:33.340 --> 00:33:40.100 Instead of applying the concept of just price differing from the actual price to the assessment 330 00:33:40.100 --> 00:33:48.140 of damages as in the Justinian Code, the Brachologus expanded the concept from real estate to all 331 00:33:48.140 --> 00:33:53.940 all goods, and from assessing damages to actual sales. 332 00:33:53.940 --> 00:34:00.100 In the hands of the Brachologus, if any sale, even a voluntary one, had been made at less 333 00:34:00.100 --> 00:34:06.400 than half the just price, the seller could present the buyer with the choice, either 334 00:34:06.400 --> 00:34:13.620 pay me the difference between the sale price and the just price, or else rescind the contract, 335 00:34:13.620 --> 00:34:19.020 with the buyer returning the goods and the seller returning the payment. 336 00:34:19.020 --> 00:34:24.380 It has been pointed out that this was not a cartelizing device, since neither third 337 00:34:24.380 --> 00:34:30.440 parties nor the state could step in to enforce Laecio Enormis. 338 00:34:30.440 --> 00:34:36.760 The enforcement had to be done on a charge made by the seller himself. 339 00:34:36.760 --> 00:34:42.560 The Roman law developing during the 12th and 13th centuries was largely the product of 340 00:34:42.560 --> 00:34:48.480 The University of Bologna, where Roman law studies had been founded by Ernerius in the 341 00:34:48.480 --> 00:34:51.080 late 11th century. 342 00:34:51.080 --> 00:34:57.780 In the mid-12th century, the Bolognese Roman jurists began to incorporate the broader concept 343 00:34:57.780 --> 00:35:02.300 of Laecio Enormis of the Brachologus. 344 00:35:02.300 --> 00:35:10.880 About 1150, the Provençal Locodi, a popular adaptation of a recent Bolognese summa, added 345 00:35:10.880 --> 00:35:18.680 Another Fateful Expansion of Laecio Enormous. For the first time this Provençal work included 346 00:35:18.680 --> 00:35:26.880 buyers as well as sellers as suffering from Laecio Enormous, when the sale price was significantly 347 00:35:26.880 --> 00:35:34.420 higher than the just price. In the low Coty, if a buyer had paid more than twice the true 348 00:35:34.420 --> 00:35:55.300 Remarkably, when the low cote was translated back into Latin, this new extended restriction 349 00:35:55.300 --> 00:36:02.460 on laissez-faire was added to the Roman law, particularly by Albericus, professor of Roman 350 00:36:02.460 --> 00:36:09.580 and Law at Bologna in his Canon Law collection at the end of the 12th century. 351 00:36:09.580 --> 00:36:15.540 The burgeoning principle of Laecio Enormis reached its final extension in the late 12th 352 00:36:15.540 --> 00:36:23.300 century work of the Bolognese trained Petrus Placentinus. Placentinus lowered the maximum 353 00:36:23.300 --> 00:36:31.940 permissible price to 1.5 times the just price, beyond which the principle of Laecio Enormis 354 00:36:31.940 --> 00:36:34.500 went into effect. 355 00:36:34.500 --> 00:36:40.020 This final expansion was incorporated into the works of the three great Bolognese Roman 356 00:36:40.020 --> 00:36:48.340 law professors of the thirteenth century, Azo circa 1210, Azo's highly influential 357 00:36:48.340 --> 00:36:57.580 student and follower Acrisius circa 1228 to 1260, a native of Florence, and the culmination 358 00:36:57.580 --> 00:37:04.340 of the Bolognese School in Odofretas in the mid-13th century. 359 00:37:04.340 --> 00:37:10.700 While it is true that the 12th and 13th century Romanists took the trivial concept of Laecio 360 00:37:10.700 --> 00:37:17.780 enormous and made it a significant restriction on freedom of bargaining and laissez-faire, 361 00:37:17.780 --> 00:37:23.620 at least by the late 12th century they also made clear that there was to be full freedom 362 00:37:23.620 --> 00:37:31.620 Freedom of Bargaining and Freedom to Outwit the Other within the Matrix of Laecio Enormis. 363 00:37:31.620 --> 00:37:37.540 The Decretalists, beginning with Pope Alexander III, incorporated much of this developing 364 00:37:37.540 --> 00:37:39.640 Roman law. 365 00:37:39.640 --> 00:37:45.380 This meant that Church law now included not only the patristic fulminations against merchants 366 00:37:45.380 --> 00:37:52.740 per se, but also the contrasting Romanist tradition of full freedom of bargaining within 367 00:37:52.740 --> 00:37:56.320 in the Laecio-enormous Matrix. 368 00:37:56.320 --> 00:38:01.840 The decretalists reached their culmination after building on and glossing the decretals 369 00:38:01.840 --> 00:38:11.180 of Gregory IX, in the works of Cardinal Henricus Hostiensis de Segucio, first in the late 1250s 370 00:38:11.180 --> 00:38:16.140 and finally in 1271, the year of his death. 371 00:38:16.140 --> 00:38:23.420 Hostiensis had studied Canon and Roman law at Bologna, had taught in England and France, 372 00:38:23.420 --> 00:38:27.220 and was Cardinal Archbishop of Ostia. 373 00:38:27.220 --> 00:38:33.940 The decretalists justified speculative buying and selling, freeing it from the sin of torpe 374 00:38:33.940 --> 00:38:40.940 lucrum by adopting and expanding the Hougouchian line that speculation was permissible if the 375 00:38:40.940 --> 00:38:46.060 speculator was acting to fulfill the needs of his family. 376 00:38:46.060 --> 00:38:52.900 In the gloss of the French-Dominican canonist William of Wren circa 1250, this area of 377 00:38:52.900 --> 00:38:55.620 freedom was broadened still further. 378 00:38:55.620 --> 00:39:01.380 A merchant's or speculator's actions were not considered sinful unless he was driven 379 00:39:01.380 --> 00:39:10.340 by a wanton desire for having temporal riches, not for necessary use or utility but for curiosity, 380 00:39:10.340 --> 00:39:13.580 so that the fancy is charmed by such. 381 00:39:13.580 --> 00:39:21.700 Just as a magpie or a crow is enticed by coins, which they discover and hide away. 382 00:39:21.700 --> 00:39:27.380 Surely this kind of stricture, which can only apply to a few persons in the real world, 383 00:39:27.380 --> 00:39:35.340 had come very far from the patristic denunciations of merchants and traders per se. 384 00:39:35.340 --> 00:39:40.780 Another loosening of restrictions came with Alanis Anglicus, an English-born professor 385 00:39:40.780 --> 00:39:47.540 of Canon Law at Bologna, writing in the first two decades of the thirteenth century. 386 00:39:47.540 --> 00:39:54.460 Alanis declared that no torpe lucrum, or usury for that matter, could exist if the future 387 00:39:54.460 --> 00:39:59.300 price of a good was uncertain in the mind of the merchant. 388 00:39:59.300 --> 00:40:04.980 Not only is uncertainty always present in the market, but also it is impossible for 389 00:40:04.980 --> 00:40:11.220 for Outside Courts or Authorities to prove that a merchant did not feel uncertain when 390 00:40:11.220 --> 00:40:13.460 he bought or sold. 391 00:40:13.460 --> 00:40:22.020 In effect, all torpe lucrum restrictions on trade or speculation had now been removed. 392 00:40:22.020 --> 00:40:28.740 In analyzing business profits, the later 13th century canonists added to the older justification 393 00:40:28.740 --> 00:40:33.360 of profit as covering labor plus expenses. 394 00:40:33.360 --> 00:40:39.120 This was the element of risk, present in every business situation. 395 00:40:39.120 --> 00:40:44.400 Increase of price as a consequence of risk was first justified in the prominent canon 396 00:40:44.400 --> 00:40:55.120 law commentaries of Pope Innocent IV, Sinibaldo Fieschi, published between 1246 and 1253. 397 00:40:55.120 --> 00:41:00.440 Before becoming pope, Innocent had been a native of Genoa and a student of Roman and 398 00:41:00.440 --> 00:41:06.240 and Canon Law at Bologna, a professor of Roman law at that university, and finally 399 00:41:06.240 --> 00:41:10.120 a cardinal and a famous statesman. 400 00:41:10.120 --> 00:41:16.840 If transactions were to be sinful and illegal beyond a certain zone above or below the just 401 00:41:16.840 --> 00:41:23.040 price, then the church and the authorities had to find some way of figuring out what 402 00:41:23.040 --> 00:41:26.400 the just price was supposed to be. 403 00:41:26.400 --> 00:41:31.520 This had not been a problem before the twelfth and thirteenth centuries, since the doctrine 404 00:41:31.520 --> 00:41:36.520 of Laecio enormous had not really been applied before. 405 00:41:36.520 --> 00:41:42.720 The Romanist and Canonist solution, reminiscent of Carolingian doctrine, was that the just 406 00:41:42.720 --> 00:41:50.280 price was the going, current, common market price, the communis estimatio. 407 00:41:50.280 --> 00:41:56.800 This meant either the competitive general market price as contrasted to single isolated 408 00:41:56.800 --> 00:42:03.680 transactions, or it could refer to prices fixed by governments or government-privileged 409 00:42:03.680 --> 00:42:12.480 guilds since such controls, by strict legality, would be the going de jure price. 410 00:42:12.480 --> 00:42:18.040 Perhaps it would have been beneath the dignity of these jurists to sanction or even recognize 411 00:42:18.040 --> 00:42:30.880 Placentinus used this criterion in late 12th century Roman jurisprudence, as did in particular 412 00:42:30.880 --> 00:42:33.480 Oso in the early 13th. 413 00:42:33.480 --> 00:42:40.400 Oso was liberal enough to refer to the price of a sale equaling that of any other comparable 414 00:42:40.400 --> 00:42:44.280 sale as being a just price. 415 00:42:44.280 --> 00:42:52.080 St. Acursius and after him, Odofretus, explicitly referred to the general or common market price 416 00:42:52.080 --> 00:42:55.220 as being the standard of justice. 417 00:42:55.220 --> 00:43:02.700 As Acursius put it, a thing was valued at that for which it could be commonly sold. 418 00:43:02.700 --> 00:43:08.160 The canon lawyers adopted the same criterion for the just price. 419 00:43:08.160 --> 00:43:14.240 Influenced by Carolingian practice and by hints from the sixth century rule of St. Benedict, 420 00:43:14.240 --> 00:43:21.840 The late 12th century canonist and student of Gratian, Simon of Bossignano, first described 421 00:43:21.840 --> 00:43:27.600 the true value of goods as the price for which they commonly sold. 422 00:43:27.600 --> 00:43:33.800 The same position was then taken by the Decretalists in the 13th century. 423 00:43:33.800 --> 00:43:39.640 Canonists and Romanists alike were now agreed on the common price of a good as the just 424 00:43:39.640 --> 00:43:41.120 one. 425 00:43:41.120 --> 00:43:46.560 But still, the developed canonists of the thirteenth century had a problem. 426 00:43:46.560 --> 00:43:52.840 On the one hand, they had adopted the Roman law view that all free bargaining was legitimate 427 00:43:52.840 --> 00:43:59.680 except for a zone more than a certain degree above or beyond the just price, which they 428 00:43:59.680 --> 00:44:03.360 held to be the going, common market price. 429 00:44:03.360 --> 00:44:09.680 But, on the other hand, they had inherited from the church fathers and the early decretists 430 00:44:09.680 --> 00:44:15.840 a hostility toward mercantile, especially speculative, transactions. 431 00:44:15.840 --> 00:44:18.920 How could they square this contradiction? 432 00:44:18.920 --> 00:44:25.840 Partly, as we have seen, they were able to weaken the extent of shameful speculation. 433 00:44:25.840 --> 00:44:32.320 Also, from the thirteenth century on, the Church and its canon lawyers largely solved 434 00:44:32.320 --> 00:44:39.240 the problem through the highly sensible doctrine of the Two Forums, over which the Church exercised 435 00:44:39.240 --> 00:44:40.800 Jurisdiction. 436 00:44:40.800 --> 00:44:47.200 The external forum, the jus fori, judged the social activities of Christians in public 437 00:44:47.200 --> 00:44:49.440 ecclesiastical courts. 438 00:44:49.440 --> 00:44:55.320 There, the courts judged offenses against the Church and her common law in much the 439 00:44:55.320 --> 00:44:59.080 same procedures as the secular courts. 440 00:44:59.080 --> 00:45:05.200 On the other hand, the internal forum, the jus poli, was the confessional, in which the 441 00:45:05.200 --> 00:45:11.800 The priest judged individual Christians on the basis of their personal relation to God. 442 00:45:11.800 --> 00:45:17.520 The two forums were separate and distinct, the respective judgments on two different 443 00:45:17.520 --> 00:45:18.960 levels. 444 00:45:18.960 --> 00:45:25.680 While the church presumed to rule over both, the one was external and social, the other 445 00:45:25.680 --> 00:45:28.640 private and personal. 446 00:45:28.640 --> 00:45:34.400 The doctrine of the two forums enabled the canonists to resolve the seeming contradiction 447 00:45:34.400 --> 00:45:36.680 in Canon Law. 448 00:45:36.680 --> 00:45:44.000 The free-bargaining Laecio-enormis common-market principle was the realm of external law and 449 00:45:44.000 --> 00:45:50.660 the open court, where, in other words, a roughly free market could prevail. 450 00:45:50.660 --> 00:45:56.640 On the other hand, the strictures against mercantile profits going beyond labor, costs 451 00:45:56.640 --> 00:46:04.000 and risk were a matter not for the state and external law, but for conscience in the confessional. 452 00:46:04.000 --> 00:46:17.000 Even more obviously for the confessional alone were the injunctions against trade or speculation based on avarice as going beyond honorable need to support one's family. 453 00:46:17.000 --> 00:46:29.000 Clearly only the man himself, internally in his conscience, could know his intentions. They were scarcely observable by external law. 454 00:46:29.000 --> 00:46:36.840 5. The Canonist Prohibition of Usury 455 00:46:36.840 --> 00:46:43.680 The great relaxation of moral and legal restrictions and prohibitions against trade that permeated 456 00:46:43.680 --> 00:46:49.880 the Canonists and Romanists in the Middle Ages unfortunately did not apply to the stern 457 00:46:49.880 --> 00:46:57.600 prohibitions leveled against usury. Modern people think of usury as very high interest 458 00:46:57.600 --> 00:47:00.120 rates charged on a loan. 459 00:47:00.120 --> 00:47:04.520 But this was by no means the meaning until recent times. 460 00:47:04.520 --> 00:47:12.560 Classically, usury means any rate whatsoever charged on a loan, no matter how low. 461 00:47:12.560 --> 00:47:19.480 The prohibition of usury was a prohibition against any interest charge on a loan. 462 00:47:19.480 --> 00:47:25.460 With one exception, no one in the ancient world, whether in Greece, China, India or 463 00:47:25.460 --> 00:47:33.220 for Mesopotamia prohibited interest. That exception was the Hebrews, who in an expression of narrow 464 00:47:33.220 --> 00:47:41.940 tribal morality permitted charging interest to non-Jews, but prohibited it among Jews. 465 00:47:41.940 --> 00:47:48.120 The fierce medieval Christian assault on usury is decidedly odd. For one thing, there is 466 00:47:48.120 --> 00:47:54.060 nothing in the Gospels or the early Fathers, despite their hostility to trade, that can 467 00:47:54.060 --> 00:47:58.560 can be construed as urging the prohibition of usury. 468 00:47:58.560 --> 00:48:06.280 In fact, the parable of the talents in Matthew, chapter 25, verses 14 through 30, can easily 469 00:48:06.280 --> 00:48:11.820 be taken as approval for earning interest on commercial loans. 470 00:48:11.820 --> 00:48:19.520 The campaign against usury begins with the First Church Council in Nicaea in 325, which 471 00:48:19.520 --> 00:48:25.320 which itself prohibited only the clergy from charging interest on a loan. 472 00:48:25.320 --> 00:48:32.480 But the Nicene Council grabbed on to one phrase of Psalm 14 in the Old Testament, 473 00:48:32.480 --> 00:48:41.520 Lord, who shall dwell in thy tabernacle, he that hath not put out his money to usury? 474 00:48:41.520 --> 00:48:48.040 And this was to become the favorite and virtually the only biblical text against usury during 475 00:48:48.040 --> 00:48:50.200 in the Middle Ages. 476 00:48:50.200 --> 00:48:56.920 The Nicene Injunctions were repeated in later 4th century councils at Alvira in Spain and 477 00:48:56.920 --> 00:49:03.880 at Carthage, and then in the 5th century Pope Leo I extended the prohibition to the laity 478 00:49:03.880 --> 00:49:11.080 as well, condemning lay userers as indulging in turpe lucrum. 479 00:49:11.080 --> 00:49:17.240 Several local councils in Gaul in the 7th century repeated Leo's denunciation, as did 480 00:49:17.240 --> 00:49:23.720 Pope Adrian and several English Church synods in the 8th century. 481 00:49:23.720 --> 00:49:30.280 But the prohibition of all usury enters secular legislation for the first time in the all-embracing 482 00:49:30.280 --> 00:49:35.360 totalitarian regime of the Emperor Charlemagne. 483 00:49:35.360 --> 00:49:42.680 At the fateful imperial synod of Aachen in 789, Charlemagne prohibited usury to everyone 484 00:49:42.680 --> 00:49:46.880 in his realm, lay and cleric alike. 485 00:49:46.880 --> 00:49:53.560 The prohibition was renewed and elaborated in the later council at Nijmegen in 806, 486 00:49:53.560 --> 00:50:00.120 where usury is defined for the first time as an exchange where more is demanded back 487 00:50:00.120 --> 00:50:02.520 than what is given. 488 00:50:02.520 --> 00:50:09.600 So that, from the time of Charlemagne, usury was intensely held to be a special and particularly 489 00:50:09.600 --> 00:50:17.600 But oddly, though the hostility toward usury continued, and was, indeed, greatly strengthened, 490 00:50:17.600 --> 00:50:32.600 The sweeping definition, more demanded than what is given, was repeated intact by canonists from the 10th century Regino of Prum through Ivo of Chartres to Grecian. 491 00:50:32.600 --> 00:50:46.600 But oddly, though the hostility toward usury continued and was indeed greatly strengthened among the canonists, the explicit basis for the antagonism changed considerably. 492 00:50:46.600 --> 00:50:55.100 During the first centuries of the Christian era, usury was shameful as a form of avarice, or lack of charity. 493 00:50:55.100 --> 00:51:00.100 It was not yet considered a vicious sin against justice. 494 00:51:00.100 --> 00:51:13.100 As commerce began to revive and flourish in 11th century Europe, indeed, denouncing interest-taking as a form of lack of charity began to be considered wide of the mark, 495 00:51:13.100 --> 00:51:31.100 Since charity had little to do with commercial loans, it was the Italian monk St. Anselm of Canterbury 1033-1109 who first shifted the ground of attack to rail against usury as theft. 496 00:51:31.100 --> 00:51:43.100 This new doctrine was developed by St. Anselm's disciple Anselm of Lucca, a fellow Italian and native of a city with a burgeoning textile industry. 497 00:51:43.100 --> 00:51:55.100 In his collection of canons, made about 1066, Anselm of Lucca explicitly condemned usury as theft and a sin against the seventh commandment, 498 00:51:55.100 --> 00:52:01.100 and Demanded Restitution of Usuries to the Borrower as Stolen Goods. 499 00:52:01.100 --> 00:52:10.100 This expansion of theft to a voluntary contract where no coercion was used was surely bizarre, 500 00:52:10.100 --> 00:52:20.100 and yet this outrageous new concept caught hold and was repeated by Hugh of St. Victor, 1096-1141, 501 00:52:20.100 --> 00:52:24.100 and by the collections of Ivo of Chartres. 502 00:52:24.100 --> 00:52:38.100 In 1139, the Second Lateran Council of the Church explicitly prohibited usury to all men, laity as well as clergy, and held all usurers to be infamous. 503 00:52:38.100 --> 00:52:47.100 The council vaguely declared that the Old and New Testaments mandated such a prohibition, but gave no explicit reference. 504 00:52:47.100 --> 00:52:57.100 Nine years later, Pope Eugene III moved against the common practice of monasteries charging interest on mortgages. 505 00:52:57.100 --> 00:53:03.100 Finally, the canon law reached mature form with the Decretum of Gratian. 506 00:53:03.100 --> 00:53:09.100 Gratian hammers away against usury with whatever weapons he can find, 507 00:53:09.100 --> 00:53:16.100 from Psalm 14 to the new view that usury is theft and therefore requires restitution. 508 00:53:16.100 --> 00:53:21.060 and Constitution. Expounding on the strict prohibition of usury, 509 00:53:21.060 --> 00:53:27.860 Gracian extended it to the loan of goods as well as money, so long as anything is demanded 510 00:53:27.860 --> 00:53:35.620 beyond the principle, and he expressly declared that in such a case the just price was not 511 00:53:35.620 --> 00:53:42.860 the common market price, but zero, that is, the exact equivalent of the goods or money 512 00:53:42.860 --> 00:53:51.460 The great decretalist Pope Alexander III might have been inclined towards a free market in 513 00:53:51.460 --> 00:53:58.540 other areas, but on the usury question he merely deepened and extended the ban, applying 514 00:53:58.540 --> 00:54:05.340 the condemnation to charging higher prices for credit than for cash sales. 515 00:54:05.340 --> 00:54:11.740 This practice was denounced as implicit usury, even though it was not explicitly interest 516 00:54:11.740 --> 00:54:13.880 on a Loan. 517 00:54:13.880 --> 00:54:21.340 The Third Lateran Council, presided over by Pope Alexander III in 1179, condemned usury 518 00:54:21.340 --> 00:54:28.400 and excommunicated and denied Christian burial to all manifest userers. 519 00:54:28.400 --> 00:54:38.460 The next pope, Urban III, 1185-1187, in his Decretal Consoluit, dredged up a previously 520 00:54:38.460 --> 00:54:49.620 The Unused Citation from Jesus, Lend Freely, Hoping Nothing Thereby, Luke 6 verse 35, which 521 00:54:49.620 --> 00:54:55.620 from then on became the centerpiece of the theological condemnation of usury as a mortal 522 00:54:55.620 --> 00:55:04.060 sin, and not only that, even the very hope of obtaining usury was supposed to be a virtually 523 00:55:04.060 --> 00:55:06.940 equivalent sin. 524 00:55:06.940 --> 00:55:13.420 So pervasive was the canonist obsession with usury, that Gratian, his predecessors and 525 00:55:13.420 --> 00:55:21.020 his successors, largely worked out their theories of sale, profit, or just price, in terms of 526 00:55:21.020 --> 00:55:27.540 whether or not any particular transaction fell under the dread rubric of usury. 527 00:55:27.540 --> 00:55:35.660 Thus, late 12th century decretists like Simon of Bosignano in 1179, and the great Hugguccio 528 00:55:35.660 --> 00:55:44.300 Huguchio in 1188 maintained the strict prohibition of any interest charged on a loan as usury, 529 00:55:44.300 --> 00:55:51.780 while allowing the renting of a good or buying cheap in order to sell deer as not being cases 530 00:55:51.780 --> 00:55:54.220 of usury. 531 00:55:54.220 --> 00:56:01.700 Huguchio's tortured moral distinction maintained that a comodatum, a rental contract that transferred 532 00:56:01.700 --> 00:56:10.060 and Only the Use of a Good was somehow morally very different from a mutuum, a pure loan 533 00:56:10.060 --> 00:56:14.900 where ownership was transferred for a time. 534 00:56:14.900 --> 00:56:21.020 Charging for a lease, a commodatum, was all right, because the owner retains ownership 535 00:56:21.020 --> 00:56:24.660 and charges for the use of his own good. 536 00:56:24.660 --> 00:56:30.000 But somehow it becomes sinful when a lender charges for the use of a good which he no 537 00:56:30.000 --> 00:56:40.420 Profits on trade, too, could be legitimate and lawful as a reward for risk, but interest 538 00:56:40.420 --> 00:56:48.860 on a loan, where the risk is borne by the borrower and not the lender, was always usury. 539 00:56:48.860 --> 00:56:54.760 The later decretalists attempting to combat practices of merchants in disguising usury 540 00:56:54.760 --> 00:57:03.340 in various contracts, pressed on to condemn such contracts as implicit usury, provided, 541 00:57:03.340 --> 00:57:09.400 as we have seen in treatment of sales contracts, that there is no uncertainty on the future 542 00:57:09.400 --> 00:57:13.900 price in the minds of buyer and seller. 543 00:57:13.900 --> 00:57:20.720 The early 13th century canonist Alanis Anglicus declared that if there was uncertainty in 544 00:57:20.720 --> 00:57:28.820 In such a contract, and buyer and seller stood equal chance to gain or lose, usury did not 545 00:57:28.820 --> 00:57:36.120 exist. Providing the first real, if small, loophole in the sweeping prohibition against 546 00:57:36.120 --> 00:57:43.520 usury, Anglicus explained that this form of implicit usury could exist only in the mind, 547 00:57:43.520 --> 00:57:50.480 and could not be subject to legal enforcement. This uncertainty loophole was widened slightly 548 00:57:50.480 --> 00:57:54.600 in the Decretals of Gregory Ninth. 549 00:57:54.600 --> 00:58:00.120 On the other hand, the canonists persisted in cracking down on evasions of the usury 550 00:58:00.120 --> 00:58:05.720 ban which the market kept creatively inventing. 551 00:58:05.720 --> 00:58:11.640 Contracts providing for deferred payment on a sale were treated with suspicion, and very 552 00:58:11.640 --> 00:58:18.320 high prices in such a contract were taken by the canonists to prove intent to commit 553 00:58:18.320 --> 00:58:22.040 usury beyond a reasonable doubt. 554 00:58:22.040 --> 00:58:28.960 The decretals also went so far as to condemn creditors charging interest for loans to traveling 555 00:58:28.960 --> 00:58:35.400 merchants, even though the canonists realized that the interest was a direct compensation 556 00:58:35.400 --> 00:58:37.880 for risks. 557 00:58:37.880 --> 00:58:44.760 Although canonists after Innocent Fourth began to talk of risks justifying profits, so that 558 00:58:44.760 --> 00:58:50.280 and a profit on risky investments was considered perfectly justified. 559 00:58:50.280 --> 00:59:00.280 Any interest on a pure loan or mutuum was condemned as usury despite reasonably mitigating circumstances. 560 00:59:00.280 --> 00:59:06.240 The usury prohibition was the tragic flaw in the economic views of medieval jurists 561 00:59:06.240 --> 00:59:08.280 and theologians. 562 00:59:08.280 --> 00:59:14.800 The prohibition was economically irrational, depriving marginal borrowers and high credit 563 00:59:14.800 --> 00:59:19.120 risks of any borrowed capital whatever. 564 00:59:19.120 --> 00:59:26.520 It had no groundwork in natural law, and virtually none in Old or New Testament teachings. 565 00:59:26.520 --> 00:59:32.760 And yet, it was clung too fiercely throughout the Middle Ages, so that jurists and theologians 566 00:59:32.760 --> 00:59:38.160 Medievalists had to engage in ingenious and artful twists in reasoning in order to make 567 00:59:38.160 --> 00:59:44.840 exceptions from the prohibition and to accommodate the growing practice of lending money and 568 00:59:44.840 --> 00:59:47.920 charging interest on a loan. 569 00:59:47.920 --> 00:59:54.400 And yet the medievalists, especially the later philosophers and theologians, had a fascinating 570 00:59:54.400 --> 00:59:56.760 and important point. 571 00:59:56.760 --> 01:00:03.940 Or what was the moral or economic justification for interest on a pure loan? 572 01:00:03.940 --> 01:00:10.140 As we will see, medieval scholastics came to understand full well the economic and moral 573 01:00:10.140 --> 01:00:16.860 justifications for almost every aspect of interest charges, as an implicit profit on 574 01:00:16.860 --> 01:00:24.280 risk, as an opportunity forgone for making profits on investments, and many others. 575 01:00:24.280 --> 01:00:33.320 Why is there still interest charged on a simple, riskless, non-opportunity foregone loan? 576 01:00:33.320 --> 01:00:39.500 That answer was not to come fully until the Austrian school of the late 19th century. 577 01:00:39.500 --> 01:00:45.140 Where the scholastics were gravely lacking was in not realizing that if interest was 578 01:00:45.140 --> 01:00:53.780 paid as well as charged voluntarily, that in itself is sufficient moral justification. 579 01:00:53.780 --> 01:01:00.580 and further that there must have been an economic explanation, even though economic science 580 01:01:00.580 --> 01:01:04.020 had not yet discovered it. 581 01:01:04.020 --> 01:01:11.540 The first systematic breach in the usury prohibition came with the last of the 13th century canonists, 582 01:01:11.540 --> 01:01:14.460 Cardinal Hostiensis. 583 01:01:14.460 --> 01:01:21.700 In addition to having been a distinguished law professor, Hostiensis was a worldly cosmopolite, 584 01:01:21.700 --> 01:01:29.640 Having been the ambassador of Henry III to his friend Pope Innocent IV, first Hostiensis 585 01:01:29.640 --> 01:01:36.620 reverted to the old milder tradition that usury is uncharitable but not a sin against 586 01:01:36.620 --> 01:01:38.540 justice. 587 01:01:38.540 --> 01:01:45.620 Then he listed no less than thirteen instances in which the usury prohibition could be broken 588 01:01:45.620 --> 01:01:49.260 and interest charged on a loan. 589 01:01:49.260 --> 01:01:56.060 One is as surety required by the guarantor of a loan. Another, that a seller may charge 590 01:01:56.060 --> 01:02:03.860 a higher price for a good sold on credit than for cash, provided that there is uncertainty, 591 01:02:03.860 --> 01:02:10.500 as indeed there always is, about the future price of the commodity. Another important 592 01:02:10.500 --> 01:02:16.900 exception allowed a creditor to write a penalty clause into a loan, so that the debtor would 593 01:02:16.900 --> 01:02:23.820 have to pay a penalty above the principal if he did not repay on the date due. 594 01:02:23.820 --> 01:02:30.840 This of course paved the way for covert agreement on both sides to delay payment so as to allow 595 01:02:30.840 --> 01:02:33.320 the penalty. 596 01:02:33.320 --> 01:02:38.860 Another exception was that the creditor might charge for labor which he undertook in making 597 01:02:38.860 --> 01:02:42.180 the particular loan. 598 01:02:42.180 --> 01:02:47.100 These were all some form of penalty or special payment. 599 01:02:47.100 --> 01:02:53.260 But in addition, Hostiensis provided the first path-breaking argument for charging a rate 600 01:02:53.260 --> 01:03:02.440 of interest on a loan from the very beginning, a charge that does not involve delay or guarantees. 601 01:03:02.440 --> 01:03:09.620 This is lucram cessans, profit ceasing, a legitimate interest charge by the creditor 602 01:03:09.620 --> 01:03:16.300 and to compensate him for profit foregone in investing the money himself. 603 01:03:16.300 --> 01:03:25.900 In short, Lucrum Cessans anticipated the Austrian concept of opportunity cost, of income foregone, 604 01:03:25.900 --> 01:03:29.220 and applied it to the charging of interest. 605 01:03:29.220 --> 01:03:36.540 Unfortunately, however, Cardinal Hostiensis' use of Lucrum Cessans was limited to non-habitual 606 01:03:36.540 --> 01:03:43.980 Lenders who lend money out of charity to a debtor. Thus lenders could not be in the business 607 01:03:43.980 --> 01:03:50.380 of charging money on a loan, even on the ground of lucrum cessans. 608 01:03:50.380 --> 01:03:56.060 Another exception made by Hostiansus also provided an open channel for the charging of 609 01:03:56.060 --> 01:04:03.180 interest on loans. He allowed the debtor to give a free gift to the creditor, so long 610 01:04:03.180 --> 01:04:07.980 as long as the gift was not required by the creditor. 611 01:04:07.980 --> 01:04:15.580 But in that case debtors, in particular Florentine bankers who received deposits, felt obliged 612 01:04:15.580 --> 01:04:22.300 to make gifts to their depositors, else the depositors would shift their funds to competitors 613 01:04:22.300 --> 01:04:25.900 who habitually made such gifts. 614 01:04:25.900 --> 01:04:32.620 The making of a fake gift became an important mechanism in allowing the de facto charging 615 01:04:32.620 --> 01:04:33.380 of Interest.